The four major financial holding companies are projected to surpass 10 trillion won in net profit in the first half of this year. This would mark the largest amount on a semiannual basis in history. The key issue is how much of the net profit will be returned to shareholders. Fueled by active efforts to enhance corporate value, it is expected that the shareholder return rate, which was in the 30% range early last year, will rise to 50%. This means that half of the profits will be returned to shareholders.
According to financial information company FnGuide on the 15th, the estimated net profit (on a consolidation basis) for the four major financial holding companies, including KB, Shinhan, Hana, and Woori, is projected to be 10.929 trillion won. This represents a 7.2% increase compared to the first half of last year.
By holding company, the net profit estimate for KB Financial is the highest at 3.3286 trillion won. This is expected to be a 19.7% increase compared to the first half of last year (2.7813 trillion won), when performance plummeted due to losses from Hong Kong H-index equity-linked securities (ELS). Shinhan Financial and Hana Financial are also expected to see net profits rise by 8.5% and 8%, respectively, to 2.98 trillion won and 2.2524 trillion won. Among these, Woori Financial is forecasted to see a 14.9% decrease in net profit, recording 1.5319 trillion won.
The significant increase in interest income from the major affiliate banks has driven the upward trend in performance. The 'interest rate spread' (the difference between loan interest rates and deposit interest rates), which forms the basis of bank interest income, has widened to its largest level in the first half of this year. According to statistics from the Korea Federation of Banks, the household interest rate spread for the four major banks, including KB Kookmin, Shinhan, Hana, and Woori, increased from 0.15-0.53 percentage points in July last year to 1.26-1.46 percentage points in May this year. This is because while banks have rapidly lowered deposit rates during the interest rate cutting phase, they have not reduced loan rates under the pretext of managing household loans.
Financial holding companies are focusing on expanding shareholder returns. The shareholder return rate for the four major financial holding companies rose from the 30% range in 2022 to the 40% range last year and is on the verge of exceeding 50% this year. The shareholder return rate is the ratio of the sum of dividends and share buybacks to net profit, meaning that a rate of 50% indicates that half of the annual net profit will be returned to shareholders. NH Investment & Securities recently noted in a report that "the CET1 (common equity tier 1) ratio for KB Financial in the second quarter is expected to be around 13.71%. If capital exceeding the promised CET1 ratio of 13.5% is returned to shareholders, the total shareholder return rate for this year will reach 54%."
Hana Financial and Shinhan Financial are also expected to see shareholder return rates rise to 46% and 45.5%, respectively. In the case of Woori Financial, the CET1 ratio is below 13% due to the burden from the acquisition of an insurance company, making it difficult to expand shareholder returns for the time being. An official in charge of finance at a financial holding company said, "The expansion of shareholder return rates to boost the stock prices of financial stocks, which are typically low PBR (price-to-book ratio) stocks, will accelerate starting this year," adding, "We expect to shed the undervalued label within 2 to 3 years."